China Motor to Sell Stake In Mainland Automaker to Mitsubishi

Dec 01, 2003 Ι Industry In-Focus Ι Auto Parts and Accessories Ι By Quincy, CENS
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To further consolidate its cooperative ties with Mitsubishi Motors Corp., Taiwan's China Motor Corp. has decided to sell a stake of about 15% in its mainland Chinese subsidiary, South East Motor Corp., to its Japanese technical partner.

South East is a 50-50 auto-production venture owned by China Motor and the Fujian Automobile Group from the mainland Chinese province of the same name. China Motor reports that it is in final talks with Mitsubishi over the price of the sale, which is expected to generate several billion New Taiwan dollars (NT$34 = US$1) for the Taiwan company. The transaction is expected to be completed as early as the first half of 2004.

South East was established in 1995 and began mass production of the Delica commercial vehicle, which was redesigned by the Taiwan company on a Mitsubishi platform, in 1997. In the first 10 months of this year the subsidiary recorded sales of 64,933 passenger cars and commercial vehicles, racking up profits of over 600 million renminbi (RMB8.2 = US$1) on sales of RMB6.48 billion.

South East, the mainland subsidiary of Taiwan`s China Motor, is scheduled to produce the Veryce bread-box van in Mainland China in the second half 2004.

While Mitsubishi is not producing autos in the mainland, a senior China Motor official reports, it has sold production molds and dies for its Space Gear commercial/recreational van to several automakers there, including Wangtong Automobile Co. (a joint venture between South Korea's Hyundai and the mainland's Dong Feng Motor Group) and Hafei Auto.

Apparently, China Motor agreed to sell Mitsubishi a share in South East out of fear that the Japanese firm's dealings in the mainland would affect its own operations there, especially the introduction of new models. Mitsubishi not only provides the auto models which China Motor redesigns, but also owns 20% of the Taiwan manufacturer.

Industry insiders say that the Taiwan company will sell the shares in South East to Mitsubishi at a price not lower than net value. Eventually, the Japanese firm wants to boost its stake in the mainland automaker to 25%.

With permission for South East to produce Savrin sedans and Veryca commercial vehicles expected to come from the mainland authorities by the end of this year, China Motor is targeting an annual production volume of 300,000 units on both sides of the Taiwan Strait in 2005.

China Motor president Su Ching-yang says that with the two new models, South East is expected to achieve annual sales of more than 120,000 units. He reports that the Chinese subsidiary introduced the Lioncel (marketed in Taiwan as the Lancer) sedan in the middle of this year, and that its monthly sales now stand at about 5,000 units. The mainland firm's total sales are forecast to reach about 85,000 autos this year, double the 2002 record.

In Taiwan, China Motor sold about 70,000 autos in the first nine months of this year and Su is predicting 100,000 for the year as a whole. This will mean retention of its position as the island's No. 2 automaker, after Kuozui Motors (Toyota's local partner).
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